Unemployment During COVID19 in INDIA

Policy
Impact of COVID-19 on employment in urban areas

Omir Kumar , Shashank Srivastava - September 17, 2021
In April 2020, the International Labour Organisation (ILO) estimated that nearly 2.5 crore jobs could be
lost worldwide due to the COVID-19 pandemic in 2020. Further, it observed that more than 40 crore
informal workers in India may get pushed into deeper poverty due to the pandemic. In this blog post, we
discuss the effect of COVID-19 on unemployment in urban areas as per the quarterly Periodic Labour
Force Survey (PLFS) report released last week, and highlight some of the measures taken by the central
government with regard to unemployment.
Methodology for estimating unemployment in PLFS reports

The National Statistics Office (NSO) released its latest quarterly PLFS report for the October-
December 2020 quarter. The PLFS reports give estimates of labour force indicators including Labour
Force Participation Rate (LFPR), Unemployment Rate, and distribution of workers across industries.
The reports are released on a quarterly as well as annual basis. The quarterly reports cover only urban
areas whereas the annual report covers both urban and rural areas. The latest annual report is available
for the July 2019-June 2020 period.
The quarterly PLFS reports provide estimates based on the Current Weekly Activity Status (CWS).
The CWS of a person is the activity status obtained during a reference period of seven days preceding
the date of the survey. As per CWS status, a person is considered as unemployed in a week if he did
not work even for at least one hour on any day during the reference week but sought or was available
for work. In contrast, the headline numbers on employment-unemployment in the annual PLFS reports
are reported based on the usual activity status. Usual activity status relates to the activity status of a
person during the reference period of the last 365 days preceding the date of the survey.
Unemployment rate remains notably higher than the pre-COVID period

To contain the spread of COVID-19, a nationwide lockdown was imposed from late March till May 2020.
During the lockdown, severe restrictions were placed on the movement of individuals and economic
activities were significantly halted barring the activities related to essential goods and services.
Unemployment rate in urban areas rose to 20.9% during the April-June quarter of 2020, more than double
the unemployment rate in the same quarter the previous year (8.9%). Unemployment rate refers to the
percentage of unemployed persons in the labour force. Labour force includes persons who are either
employed or unemployed but seeking work. The lockdown restrictions were gradually relaxed during the
subsequent months. Unemployment rate also saw a decrease as compared to the levels seen in the April-
June quarter of 2020. During the October-December quarter of 2020 (latest data available), unemployment
rate had reduced to 10.3%. However, it was notably higher than the unemployment rate in the same
quarter last year (7.9%).
Figure 1: Unemployment rate in urban areas across all age groups as per current weekly activity
status (Figures in %)

Note: PLFS includes data for transgenders among males.
Sources: Quarterly Periodic Labour Force Survey Reports, Ministry of Statistics and Program Implementation; PRS.
Recovery post-national lockdown uneven in case of females

Pre-COVID-19 trends suggest that the female unemployment rate has generally been higher than the male
unemployment rate in the country (7.3% vs 9.8% during the October-December quarter of 2019,
respectively). Since the onset of the COVID-19 pandemic, this gap seems to have widened. During the
October-December quarter of 2020, the unemployment rate for females was 13.1%, as compared to 9.5%
for males.
The Standing Committee on Labour (April 2021) also noted that the pandemic led to large-scale
unemployment for female workers, in both organised and unorganised sectors. It recommended: (i)
increasing government procurement from women-led enterprises, (ii) training women in new technologies,
(iii) providing women with access to capital, and (iv) investing in childcare and linked infrastructure.
Labour force participation

Persons dropping in and out of the labour force may also influence the unemployment rate. At a given
point of time, there may be persons who are below the legal working age or may drop out of the labour
force due to various socio-economic reasons, for instance, to pursue education. At the same time, there
may also be discouraged workers who, while willing and able to be employed, have ceased to seek work.
Labour Force Participation Rate (LFPR) is the indicator that denotes the percentage of the population
which is part of the labour force. The LFPR saw only marginal changes throughout 2019 and 2020.
During the April-June quarter (where COVID-19 restrictions were the most stringent), the LFPR was
35.9%, which was lower than same in the corresponding quarter in 2019 (36.2%). Note that female LFPR
in India is significantly lower than male LFPR (16.6% and 56.7%, respectively, in the October-December
quarter of 2019).
Figure 2: LFPR in urban areas across all groups as per current weekly activity status (Figures in %)
Note: PLFS includes data for transgenders among males.
Sources: Quarterly Periodic Labour Force Survey Reports, Ministry of Statistics and Program Implementation; PRS.
Measures taken by the government for workers
The Standing Committee on Labour in its report released in August 2021 noted that 90% of workers in
India are from the informal sector. These workers include: (i) migrant workers, (ii) contract labourers, (iii)
construction workers, and (iv) street vendors. The Committee observed that these workers were worst
impacted by the pandemic due to seasonality of employment and lack of employer-employee relationship
in unorganised sectors. The Committee recommended central and state governments to: (i) encourage
entrepreneurial opportunities, (ii) attract investment in traditional manufacturing sectors and developing
industrial clusters, (iii) strengthen social security measures, (iv) maintain a database of workers in the
informal sector, and (v) promote vocational training. It took note of the various steps taken by the central
government to support workers and address the challenges and threats posed by the COVID-19 pandemic
(applicable to urban areas):
 Under the Pradhan Mantri Garib Kalyan Yojana (PMGKY), the central government contributed both
12% employer’s share and 12% employee’s share under Employees Provident Fund (EPF). Between
March and August 2020, a total of Rs 2,567 crore was credited in EPF accounts of 38.85 lakhs eligible
employees through 2.63 lakh establishments.

 The Aatmanirbhar Bharat Rozgar Yojna (ABRY) Scheme was launched with effect from October 2020
to incentivise employers for the creation of new employment along with social security benefits and
restoration of loss of employment during the COVID-19 pandemic. Further, statutory provident fund
contribution of both employers and employees was reduced to 10% each from the existing 12% for all
establishments covered by EPF Organisation for three months. As of June 30, 2021, an amount of Rs
950 crore has been disbursed under ABRY to around 22 lakh beneficiaries.

 The unemployment benefit under the Atal Beemit Vyakti Kalyan Yojana (launched in July 2018) was
enhanced from 25% to 50% of the average earning for insured workers who have lost employment due
to COVID-19.

 Under the Prime Minister’s Street Vendor’s Aatma Nirbhar Nidhi (PM SVANidhi) scheme, the central
government provided an initial working capital of up to Rs 10,000 to street vendors. As of June 28,
2021, 25 lakh loan applications have been sanctioned and Rs 2,130 crore disbursed to 21.57 lakh
beneficiaries.
The central and state governments have also taken various other measures, such as increasing spending on
infrastructure creation and enabling access to cheaper lending for businesses, to sustain economic activity
and boost employment generation.

Unemployment During COVID19 in INDIA

Uploaded by

Copyright:

Available Formats

Unemployment During COVID19 in INDIA

Uploaded by

Document Information

Original Description:

Original Title

Copyright

Available Formats

Share this document

Share or Embed Document

Sharing Options

Did you find this document useful?

Is this content inappropriate?

Copyright:

Available Formats

Unemployment During COVID19 in INDIA

Uploaded by

Copyright:

Available Formats

Policy

Impact of COVID-19 on employment in urban areas

Methodology for estimating unemployment in PLFS reports

Unemployment rate remains notably higher than the pre-COVID period

Note: PLFS includes data for transgenders among males.

Recovery post-national lockdown uneven in case of females

Labour force participation

Note: PLFS includes data for transgenders among males.

You might also like